A Property/Casualty Practitioner s Guide to Health Care Reform

Transcription

1 A Property/Casualty Practitioner s Guide to Health Care Reform 2015 RPM Seminar Ann Conway, FCAS, MAAA, CERA Anne Petrides, FCAS, MAAA March 11, Towers Watson. All rights reserved.

2 What is Health Care Reform and what do we hope to accomplish in today s session as respects Property Casualty Insurance? What is Health Care Reform? Patient Protection and Affordable Care Act (PPACA), Affordable Care Act (ACA), Obamacare, signed into law on March 23, 2010 Broad goals are coverage expansion, improved health outcomes and cost control Roll out was immediate through 2018, many key provisions effective 1/1/2014 Supreme Court Challenges continue Health Care Reform and Property Casualty Insurance As impact is uncertain, our goal is to introduce ACA provisions and hypothesize on their impact on PC insurance In limited cases, we will supplement hypotheses with statistics or anecdotes We welcome additional insight and opinions INTRODUCTION 1

3 INTRODUCTION So why have we gotten here? Health care cost trends remain double the rate of inflation, even after employers have changed plan designs *Expected. Source: 2014 Towers Watson/NBGH Employer Survey on Purchasing Value in Health Care. Median trends for medical and drug claims for active employees. CPI-U extracted from the Department of Labor, Bureau of Labor Statistics. 2

4 Just where is the where? INTRODUCTION U.S. Health expenditures are approaching 20% of GDP NHE as a Share of GDP 5.2% 7.2% 9.2% 12.5% 13.8% 14.5% 15.4% 15.9% 16.0% 16.1% 16.2% 16.4% 16.8% 17.4% 17.4% 17.3% 17.2% Notes: According to CMS, population is the U.S. Bureau of the Census resident-based population, less armed forces overseas Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at 3 (see Historical; NHE summary including share of GDP, CY ; file nhegdp10.zip

5 And how do we compare to others? INTRODUCTION [1] Graphic: Health Spending by Public and Private Sector, Kaiser Health News, February

6 INTRODUCTION Health care reform takes aim at three key areas Reduce costs Improve care (for individuals) The Triple Aim Improve health (for entire populations) 5

7 INTRODUCTION Timeline to Triple Aim: Although PPACA was enacted in 2010 the real impact began in 2014 Individual mandate Coverage in public exchanges begins Premium and cost-sharing subsidies Medicaid eligibility expanded Market reforms/coverage mandates/wellness programs TRF reporting ( ) Sale of health insurance across state borders permitted Excise tax on employersponsored health coverage Employer mandate (possibly 2016) Comprehensive OOPMs for most plans TRF payment ( ) States may open exchanges to large employers (over 100 employees) Last TRF payment 6

8 HEALTH SYSTEM DYNAMICS While the goals are relatively simple, the system dynamics are not Large Employers (50+ employees) Employer Plans Small Employers (<50 employees) Individual Plans Uninsured Medicaid/ CHIP Medicare Employer pays penalty Insurance Market Reforms, Guaranteed Issue, No Medical Underwriting Employer benefits meet minimum plan and affordability requirements for employees* or Employees seek coverage through exchanges, private market, or public programs Carrier A Exchange/Private Market Carrier B Carrier C Carrier D CO-OP Public Programs Medicaid/ CHIP Medicare Source: Kaiser Family Foundation 7

9 HEALTH SYSTEM DYNAMICS Key Private Market Provisions of the ACA Significant market reforms Guaranteed issue/elimination of medical underwriting Modified community rating Rating factors limited to age, tobacco use, geographic area, and family consideration Limited variation in rating factors Minimum coverage requirements Essential Health Benefits Actuarial Value (e.g. metal tiers) Limitations on out of pocket maximums, annual/lifetime limits Transparent marketplace Exchanges Rate review Rate stabilization programs Risk adjustment Reinsurance Risk corridor 8

10 Demand for medical services is a source of risk and uncertainty under ACA HEALTH SYSTEM DYNAMICS Guaranteed issue and individual mandate expected to reduce uninsured population Congressional Budget office currently estimates that by 2018, 29 million people will be uninsured under the ACA in comparison to 55 million people that would be uninsured without the ACA Varying opinions on relative morbidity of uninsured populations and impact of pent-up demand Cost-sharing design of private health plans may change incentives to seek care Focus on primary care and preventive medicine will increase demand for these services, but how much? Need to balance cost control with quality service Increased reliance on physician extenders to meet demand Specialists may be differently impacted 9

11 HEALTH SYSTEM DYNAMICS Impact of PPACA on health care delivery systems Immediate expansion of Medicaid coverage Possible sicker patients Lower reimbursement rates Increased competition for patients with private insurance Shifting employer role in health care provision Greater provider accountability may lead to integrated care models Emphasis on healthcare information technology (HIT) Uneasy intersection of increased patient demand and decreased physician supply Increased focus on efficiency, outcomes, and cost effectiveness The above items represent significant changes in health care delivery. How will this impact consumers and how will their behaviors change in response? 10

12 HEALTH SYSTEM DYNAMICS The employer role in health care benefit delivery is likely to shift, driven in part by the impact of the excise tax The excise tax is significant: Non-deductible 40% tax on excess of employer health plan cost over cost thresholds Cost based on COBRA rate Includes pre-tax contributions to HSAs/FSAs, on-site clinics, etc Active cost thresholds $10,200 individual $27,500 family Indexed CPI-U plus 1% for 2019 CPI-U only, beginning in 2020 Employer strategies include: Traditional Current State Employer controls all aspects of plan design and funding Employer responsible for plan administration, enrollment and communication Employer subsidy linked solely to employer plans Employee may not see full value of health care benefit Private Exchanges for Actives/Pre-65s In formative stages Employers need to evaluate risk and financing If fully insured, costs may be higher Adverse selection risk Employer retains financial subsidy and initial eligibility determination; other administrative responsibilities passed to the exchange Partial Exit Private Medicare Exchanges Well established; provide individual market for Medicare enrollees Individual plans offer higher value vs. group plans (MA, Part D) Employer may continue financial subsidy via HRA Employer ceases all other aspects of governance and plan management Full Exit Public Exchanges Intended to create functioning individual market Availability of federal subsidies to offset premiums and OOP Active employees subject to play or pay decision and associated costs and complications Opportunity for pre-65 retiree exit 11

13 Property/casualty risk profiles are likely to evolve in reactions to these changes Medical professional liability Health care providers Insurance and other risk-financing mechanisms Workers compensation Employers, employees, and health care providers Insurance and other risk-financing mechanisms PROPERTY/CASUALTY IMPLICATIONS Directors & officers, errors & omissions, and employment practices liability Health care providers Employers Health insurers Fiduciary liability Automobile liability 12

14 PROPERTY/CASUALTY IMPLICATIONS Discussion of PPACA and Property/Casualty Coverages In the following slides, we identify areas for discussion on the impact of ACA on property/casualty insurance Our opinion is that it is still too early to definitively state these impacts and how they will vary by state. The information within the next few slides is meant to provoke thought and discussion. It is NOT an exhaustive listing of all possible impacts. 13

15 POTENTIAL IMPLICATIONS FOR WORKERS COMPENSATION & MEDICAL PROFESSIONAL LIABILITY Decrease in the uninsured population Provision Individual mandates/ guaranteed issue Subsidies to expand private insured population Medicaid eligibility expansion How this could LOWER liability More access Healthier workers, fewer injuries, less delay in diagnosis (WC) Could be claim/cost shift to Group Health as GH system less administrative burden to access (WC) GH will now cover pre-existing conditions previously absorbed by WC may as EE had no alternative (WC) Earlier treatment can lead to better outcomes (MPL) Early prenatal care reduces pregnancy risk (MPL) Future economic losses possibly smaller for those eligible for expanded coverage (MPL) Likely Impact Fewer uninsured and more units of service delivered More patients on Medicaid CBO estimates from January 2015, expect that in 2015 under ACA 19 million less uninsured, and uninsured population at 36 million How this could RAISE liability Capacity shortage can delay return to work (WC) resulting in higher indemnity benefits (Specialist availability expected to be less impacted than primary care or lead to increased errors (MPL)) More units of service more potential risk (MPL) Increase in insurance not associated with decline in ED utilization (MPL) 14

16 POTENTIAL IMPLICATIONS FOR WORKERS COMPENSATION & MEDICAL PROFESSIONAL LIABILITY Change in provider model to increase use of non-physician practitioners (NP, PA, Pharmacists/ Health Care Extenders ) Provision Increased access will lead to increased use of HCE to meet need How this could LOWER liability Non physicians more likely to follow algorithms (WC & MPL), HCE currently have lower costs (WC & MPL) How this could RAISE liability Likely Impact Expanded scope of care for HCE s, pharmacists, etc. Different level of expertise could lead to missed diagnoses (WC & MPL) Physician shortage could lead to inadequate supervision (WC & MPL) Current nursing shortage could be exacerbated (WC & MPL) Current debates in many states to increase the scope of practice of NP/PAs thus the resulting impact on liability on this provision may most likely be be state specific 15

17 POTENTIAL IMPLICATIONS FOR WORKERS COMPENSATION & MEDICAL PROFESSIONAL LIABILITY Adoption of Health Care IT Provision PPACA and American Recovery and Re-investment Act of 2009 offer large incentives to providers to adopt EMRs and Computerized Physician Order Entry (CPOE) How this could LOWER liability Could lead to fewer communication errors of provider orders (WC & MPL) Ability to analyze data could lead to improved protocols (WC & MPL) Better coordination of care could reduce errors (MPL) Likely Impacts Greater use of these tools could lead to improved coordination of care and data for analysis CRICO analysis released in Feb 2014 found that of 1 years worth of claims included vulnerabilities with incorrect info in EHRs, conversion issues and system failures How this could RAISE liability Inadequate training and/or inappropriate use (e.g., cut/paste ) could increase adverse outcomes (WC & MPL) Delays in data transfers, and/or incomplete or missing data could increase errors (MPL) Additional exposure for data breaches (WC & MPL) Data provided could be used against defendants within litigation (MPL) Attention to completion of EHRs could negatively impact patient interaction (MPL) 16

18 POTENTIAL IMPLICATIONS FOR WORKERS COMPENSATION & MEDICAL PROFESSIONAL LIABILITY Change in Medicare Fee Schedules Provision Changes to FFS rates and hospital payments Less frequent fee updates Establish independent board to review growth in Medicare spending How this could LOWER costs Fees tied to the Medicare schedule could decrease (WC & MPL) If fees for specialty services decrease, there may be less incentive to do these procedures (WC & MPL) Likely Impact Fees change for services tied to Medicare fee schedule Workers Compensation Health Care Costs for Personal Injury Claims How this could RAISE costs Providers may seek alternative sources of income to close the gap from reduced Medicare revenue (WC & MPL) Increased utilization delays RTW (WC & MPL) Changing fee schedules have disproportionate impact by specialty (WC & MPL) 17

19 POTENTIAL IMPLICATIONS FOR MEDICAL PROFESSIONAL LIABILITY Accountable Care Organizations Provision Ability to earn bonuses based on overall costs of an attributed population ACO s to develop voluntarily based on efficiencies, will share in cost savings, will report on quality and costs How this could LOWER liability Increased coordination and collaboration can lead to lower malpractice risk Single organization has liability for a claim rather than multiple ones Coordination of defense across providers Reporting on quality and costs could provide transparency on best practices Likely Impact Further provider consolidation and possible return of capitation-like arrangements Requirements: adequate primary care participation, processes to promote evidenced-based medicine, reporting on quality, costs and care coordination An early Rand study (published in Feb 2014 JAMA) of 32 PCMH showed limited quality improvement and no improvement in costs or utilization over three years ( ) How this could RAISE liability Larger organizations more likely to have higher limits of liability Increased exposure to managed care liability relating to denial of care types of claims under tighter cost controls Consolidation process could increase D&O exposure (antitrust) Could exacerbate primary care physician shortage 18

20 POTENTIAL IMPLICATIONS FOR MEDICAL PROFESSIONAL LIABILITY Value-Based Payment Models Provision Medicare to establish Hospital Value Based Payment Program provide incentive payments for meeting performance criteria includes both improved care and safety Reduce/prohibit payments for readmit and hospital-acquired conditions Likely Impact Hospitals are financially rewarded based on performance Will increase efforts to eliminate defective care Proposed legislation in Congress, Standard of Care Protection Act, specifies that no federal health guidelines that are not designed to establish a standard of care cannot be interpreted as a standard of care in a medical malpractice claim. Not enacted (yet?) How this could LOWER liability Increased incentive for patient safety; should lower loss frequency and possibly severity Improvement of care due to transparency of quality information How this could RAISE liability Failure to qualify for incentive payments could be interpreted as evidence of negligence Transparency of information on quality could lead plaintiff attorneys to target underperforming providers The incentive model may exacerbate supply shortages 19

21 Employer health benefit decisions POTENTIAL IMPLICATIONS FOR WORKERS COMPENSATION Provision Employer may be exposed to excise tax Availability of exchanges How this could LOWER WC costs Emphasis on wellness could produce healthier workers, fewer injuries, shorter claim duration May pave the way for WC provider contracting changes where allowed Likely Impact Employers adjust plan benefits to shift greater out-of-pocket costs to employee Increased focus on wellness programs for employer plans Changes in contracting and network requirements Potential shift out of direct coverage delivery to Exchange How this could RAISE WC costs Exposure to greater cost-sharing may encourage employees to seek care through WC Employer transition away from health plan management may shift focus away from employee health management reducing health status and increasing reliance on WC Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.

22 Employer workforce decisions POTENTIAL IMPLICATIONS FOR WORKERS COMPENSATION Provision Employer must provide coverage to full-time employees (>= 30 hours/week) Low paid workers can t access federal subsidies if eligible for affordable employer coverage How this could IMPACT WC costs Population shift may result in employee demographic that differs from today May result in transition of WC liability from employer to outsourcing company Likely Impact Employers may look to increase part-time/ cut back full-time roles Employers may consider outsourcing lower paid workers Employees own coverage likely to have less generous benefit and/or more limited access How this could RAISE WC costs Shift to a part-time workforce may engage a different skill level / type of employee / turnover rate Employees with less health care coverage may look to WC as a source of health coverage Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.

23 POTENTIAL IMPLICATIONS FOR OTHER COVERAGES Other Property/Casualty Lines of Business Directors and Officers Liability\EPLI Anti-trust concerns for larger systems Merger and Acquisition exposure St Lukes FTC decision in Boise, Idaho Health Insurers Considerations Public\Private; For-Profit\Non-for-Profit Concerns on workforce demographics and PPACA requirements Automobile Liability Care delivery could impact costs Offset potential need to understand collateral source rules Fiduciary Liability ERISA legislation imposes personal liability on fiduciaries and parties at interest for discretionary judgment authority related to establishment and maintenance of employee benefit plans. Increased employer exposure with complexity of ACA for employer sponsored health care plans, including communication requirements to employees 22

24 SUMMARY Conclusions It is too early to understand the actual impacts of Health Care Reform on PC coverages The impacts will vary by state, reflecting differences in ACA implementation, regulatory environments, tort and no-fault provisions Insurance professionals can prepare now to collect, analyze and monitor data. Be prepared to react in a timely manner. 23

25 SUMMARY Sources of Additional Information CMS - Centers for Medicare and Medicaid Services Kaiser Family Foundation Robert Wood Johnson Foundation - Health data Broad consumer overview recommended by Kaiser Family Foundation California Healthcare Foundation HHS Assistant Secretary for Planning and Evaluation RAND: How will the PPACA affect liability insurance costs? 24

26 SUMMARY Contact Information Ann M. Conway, FCAS MAAA CERA Director Towers Watson p Anne Petrides, FCAS MAAA Vice President Large Group Services and Actuarial Medical Insurance Exchange of California p